Rural China Missing the barefoot doctors

THE county of Luochuan, on the loess plateau of northern Shaanxi Province, used to be one of China's poorest places. Today it looks relatively prosperous. The main street of the county seat is lined with hotels and restaurants, and the reddening orchards of this apple-growing district stretch beyond the town. Household net incomes per head in rural Luochuan are now approaching the average for the Chinese countryside. Last year they rose by more than 9%, slightly under average.

During the Maoist purges of the 1960s, this was a place where, according to Luochuan's official history, “everyone was afraid”. But memories of the Cultural Revolution have long since faded. Luochuan's state-owned agricultural-machinery factory, which once turned out tanks and hand-grenades for Maoist mobs, has been idle for years and is trying to find a buyer. Farmers can now grow what they want, instead of grain as Mao insisted.

But Luochuan's rural citizens are nostalgic for the past. They want a public-health system that works. Mao's system of “barefoot doctors” for country districts, set up in Luochuan in 1970, may have been rudimentary, but at least it was readily accessible and practically free. Public-health care in Luochuan, as elsewhere in rural China, is now in tatters. And the extent of rural discontent is at last becoming known, as western journalists are slowly allowed to explore the backward interior.

In recent years China's Communist Party has begun to pay attention to a deep malaise in the countryside: the prohibitive cost of health care and education for the rural poor, mounting debts at the lowest levels of government, bloated bureaucracy and a growing wealth gap between rural and urban areas. Riots have become common, fuelled by the attempts of avaricious governments to raise money by selling farmers' land. Incomes may have been rising, but so has dissatisfaction. In some parts of China, more than 60% of those in dire poverty have been driven there by medical expenses. And for many rural residents the higher levels of schooling are becoming unaffordable.

President Hu Jintao and his prime minister, Wen Jiabao, like to take credit for what they portray as a change of tack. Under their leadership, the party's emphasis has switched from an all-out pursuit of economic growth to the need for balanced development that takes more account of the country's poorest. The need, they often say, is to build a “new socialist countryside”. At a five-yearly congress due to begin on October 15th (see article), the party, at Mr Hu's request, will rewrite its own charter to give the president's theory about the need for “scientific development” (meaning pro-poor and pro-environment) the same sanctity as the philosophies of Mao, Deng Xiaoping and Mr Hu's predecessor, Jiang Zemin. But among the rural poor there will be little celebration.

“If peasants become better off, the country is secure,” said Mr Wen earlier this year. On average, they are becoming wealthier. For the past three years rural income per head has risen by more than 6% annually in real terms. In the first half of this year, pushed by fast-rising food prices, it was up 13%, the highest increase since 1995 according to official media. But the gap between rural and urban incomes has continued to widen. And progress has been far slower in areas like Shaanxi, far from the prospering coast (see chart 1).

Rural China is still home to about 60% of the country's 1.3 billion people, but agriculture's contribution to GDP has fallen from more than a quarter in 1990 to less than 12% today. Central-government spending on agriculture and rural welfare as a proportion of total spending has similarly fallen from 8-11% in the 1990s to 7-8% for most of this decade. Thanks to a booming economy under Mr Hu and Mr Wen, the central budget is getting bigger and its expenditure is growing fast. But outlays on health care and education, as a proportion of total spending, remain lower than they were a decade ago.

Where boom doesn't reachThe 2,217 delegates to the congress, for whom dissent is taboo, will praise Mr Hu's achievements. For the first time in Chinese history, farmers, except for tobacco-growers, have been exempted from tax on their land or agricultural production. This has marked the end of a process of rural tax cuts that began well before Mr Hu took office. Since 2003 a new medical-insurance system, involving for the first time a financial commitment by the central government, has been set up in at least 80% of rural counties in place of the long-discarded barefoot-doctor scheme. At the same time, rural children have begun to enjoy free education during their nine years of compulsory schooling—although many still have to pay for their textbooks.

Since 2004 the government, for the first time, has been giving direct subsidies to grain farmers in an effort to keep them growing grain and to curb grain-price rises. This year the subsidies are due to rise 63%, to 42.7 billion yuan ($5.7 billion). Grain output has risen for three consecutive years, the best stint of growth since 1985. But high grain prices may have encouraged this more than the subsidies, which have been largely offset by the rising cost of fuel, fertiliser and other materials.

The changes are a temporary salve, at best. In the case of the medical-insurance scheme, the biggest beneficiaries are the richest peasants. The poorest are just as likely to choose to die at home rather than risk deeper impoverishment of their families by venturing into hospital. The measures also do next to nothing for a huge section of the rural population that has moved to the cities in recent years. These people, perhaps 150m of them, enjoy neither the recent benefits accorded to those who have stayed on the land nor the far greater subsidies enjoyed by their city-born counterparts. In 2004 the World Health Organisation (WHO) described the launch of the new medical system during such a rapid population shift as “the equivalent of launching a ship with a radically new design at the height of a typhoon”. The ship is not weathering well.

In Jiuxian, one of Luochuan's 16 townships, the hospital is one of the better looking buildings amid a hotch-potch of grey and brown Mao-era edifices (some of them “caves”, built directly in the loess soil and open only at the front). It has recently been rebuilt at a cost of 4.5m yuan. A cluster of crates in the lobby containing new medical equipment has yet to be unpacked. A handwritten notice explains how the township's 14,000 citizens, most of them scattered in 34 surrounding villages, can enjoy the benefits of what is known as the “new co-operative medical system” introduced three years ago.

The system sounds a good deal. For a premium of a mere 15 yuan (about $2) a year, Jiuxian's residents can claim back a big part of their hospital costs. Before 2004 they had no insurance at all. Now, beyond a certain threshold (which varies between 100 yuan and 600 yuan according to the quality of hospital) and up to a ceiling of 10,000 yuan a year, they can reclaim between 40% and 60% (the better the hospital, the lower the percentage). The premium is waived entirely for the “impoverished”, of which there are several hundred in the township. For each premium paid, the central government contributes another 10 yuan. The provincial, prefectural and county governments add a total of another 10 yuan to the kitty.

The premiums may sound small for such potentially great rewards. But for rural residents, who earned on average 3,371 yuan last year, 15 yuan amounts to nearly two days' income. In Luochuan, as in other counties where the insurance scheme has been launched, officials have reported very high rates of participation by farmers, usually over 80%. But a former senior official in Luochuan's health bureau says participation has not been as voluntary as officials make it out to be.

Yang Xiumei, who is lying on a hard bed in a small, dim ward (left untouched by upgrading) of Jiuxian's hospital, has picked the wrong time to suffer haemorrhaging and abdominal pains. In her village, says the 44-year-old Ms Yang, officials told farmers that insurance premiums would be deducted, whether they liked it or not, from subsidies they were due to be given for growing grain. But they have received neither the subsidies nor the crucial enrolment booklet for the insurance scheme. The hospital considers her uninsured, and her costs are mounting.

What if Ms Yang had received her booklet? Her insurance would not kick in until she had spent 100 yuan, the equivalent of nearly 11 days' income for the average Luochuan rural resident. Beyond that she would then be able to claim 60% of her expenses, but these could amount to several hundred more yuan even for a relatively minor complaint. The Jiuxian hospital, with its three doctors, can perform only the simplest operations and provide only basic care. Anything more serious requires a trip to the Luochuan county seat, 20km (12 miles) away. For insured Jiuxian residents who used county-level facilities, average out-of-pocket expenditure in June was 1,219 yuan, or four months' income.

Unnecessary X-raysHospitals are under pressure to push up charges. Jiuxian's hospital is subsidised by the county government, but only enough to cover 85% of its staff's wages, which are relatively generous. The rest of its money has to come from fees and selling medicine. The government caps the prices of common medicines, but doctors get round these by prescribing other medicines or ordering unnecessary procedures, such as X-rays. Without changes in the way rural hospitals are funded, poorer farmers will feel little benefit from the new insurance scheme. Henk Bekedam of the WHO says the poor would not even be able to find the cash to pay for treatment at first, even though some of it would be reimbursed.

Researchers from the Chinese Academy of Social Sciences in Beijing have been trying to set up a parallel insurance system in Jiuxian. Under this scheme, farmers have been encouraged—more politely this time—to pay another annual premium of 10 yuan. For this they are offered free consultations and drugs about 25% cheaper than those sold in the hospital. At first the academics tried using hospital staff to administer the scheme, but it quickly became clear that the doctors were not interested in prescribing cheap drugs, only expensive ones. As disgruntled farmers pulled out of the scheme in droves, the researchers scaled back their staff and closed down all but one of their six clinics dotted around the township. Now they have just one doctor, a pharmacist and a nurse manning a clinic-cum-dispensary in the township seat. The participation rate has dropped from 40% to around 12%. Charity donations, which had helped them, have recently run out.

The county and township governments are not keen supporters of the researchers' efforts. Their main interest is to ensure that Jiuxian's hospital covers its costs. Funding it more fully from their own budgets would not be easy, especially since almost all agricultural taxes have been abolished. The official media hailed this as the lifting of a centuries-old burden on peasants. But rural governments in areas with few non-agricultural industries, though partly compensated by the central government for their losses, went into budgetary shock.

Cave-dwelling teachersZealous officials in Yanan prefecture, of which Luochuan is part, were among the first to respond to Mr Wen's tax-abolition initiative. Buoyed up by revenues from local oil and gas industries, they abolished agricultural taxes in 2004, resulting in a 200-yuan-a-year net gain on average for farmers in Luochuan, according to the official media. But Luochuan's county and township governments struggled merely to meet payroll commitments for their staff. Subsidies received by Luochuan to cover its loss of tax income were fixed at the level of its agricultural tax revenues in 2002. But miscellaneous fees imposed on farmers earlier in the decade were lost too, according to a report in Macroeconomics, a monthly journal published in Beijing.

Revenue losses have coincided with another extra financial burden: Mr Wen's policy of free education for rural children. Education expenditure from the county budget increased by 20.8% last year, compared with increases of only 6.9% and 5.6% in the previous two years. More money provided by the central, provincial and prefectural governments has helped, but not enough. Once again, Yanan prefecture has chosen to do things the hard way. It has required all schools not only to abolish fees (as ordered by the central government), but also to subsidise all boarders and give free textbooks to everyone. Luochuan county has to pay 10% of the cost of these extras from its own coffers.

At Anmin Junior Middle School, next to the county seat, so much money is flowing in to subsidise the free education programme, which began in Luochuan in 2005, that the school is handing out ten yuan in cash to boarders' families every term. Last year, with a special grant of around 2.4m yuan, the school knocked down the teachers' “cave” dwellings and built smart new dormitories for them. The school's headmaster, Gao Feilong, says the dropout rate is now zero. In the 1990s soaring fees were forcing some of Luochuan's pupils to quit school.

A survey conducted by Shenzhen University found 82% of farmers in Luochuan were happy with the recent school-fee reforms. But they were far less happy with the quality of teaching and school facilities. Fixing these problems would require a lot more money from a county that is already spending a quarter of its budget on education (mostly on teachers' wages). To cut costs, Luochuan has closed down nearly half of its 320 primary and middle schools since 2003, resulting in lay-offs for more than 700 teachers and forcing many more children to board. At Anmin School about half of the pupils live in a cramped, spartan dormitory building in a muddy yard at the back of the barrack-like complex. There may be no dropouts now, but for poorer students the huge cost of continuing their education beyond this level is a disincentive to study hard.

Luochuan's finances would work far better if it cut its bloated bureaucracy. It is trying. The county government has, in effect, taken over management of township budgets, stripping the townships of what little power they still retained. Some provinces are now bypassing both the prefectural- and township-level governments in order to get funds more directly to rural areas. But experiments with rural democracy—hailed by the party in the 1990s as a great way to improve public supervision of how money is spent—have proved too challenging to the party's political grip.

Many Chinese experts say the burden of supporting basic health care and education should be shifted to higher-level governments. That done, prefecture and township governments could be massively trimmed or eliminated altogether. But neither widespread lay-offs in an already volatile countryside nor a huge increase in central-government spending are palatable options for China's leaders.

Nor are they rushing to address the needs of those millions of country-dwellers who have moved in recent years to work in urban areas. Even peasants who have been living for several years in cities are still classified as rural residents, and as such are often excluded from urban welfare schemes. A former Luochuan resident working in Beijing, 700km to the north-east, would have to go back to the county for medical treatment if he wished to get reimbursement. Only a few million migrant workers enjoy medical insurance provided by their urban employers. From January 1st it will be compulsory for employers to offer it. But since many migrants are employed informally, without contracts, this will not make much difference.

Such problems need urgent attention. Officials say that by 2020 about 60% of the population will be living in cities or towns. This implies that more than 200m more people will move from the countryside by then. That figure may be too alarmist: there are signs that urban factories are running out of migrant labour, and reports that bad working and living conditions in some cities are deterring the rural poor. But over the coming years China's rural problems will increasingly become urban ones. China and its cities will need to spend a lot more to deal with them.